Lunchtime Must-Read: Jared Bernstein on Bob Rubin in the Financial Times

Jared Bernstein: Bob (Rubin), Paul K, Brad DL, and the Changing Budget Outlook:

Rubin’s piece had some redeeming qualities–he calls for a jobs stimulus and getting rid of the sequester–… [but] it’s a) very strange, and b) suggestive that his friends are telling him what they think he wants to hear. Re ‘a,’ the damn deficit has come down from 10% of GDP in 2009 to 4% in 2013, the largest four-year drop since 1950–that’s even before I was born! And what business person thinks this way?: “Hmmm…let me see.  There’s a lot of demand for the thing I produce, and I can still borrow very cheaply.  But despite the sharp decline in the budget deficit, CBO says that by 2040, the debt-to-GDP ratio will be really high.  So… better not expand.”  If there is someone out there doing that calculus, then with respect, they probably should go out of business.

But here’s the part of Bob’s piece that stuck me as misguided: ‘Recent reductions in deficit projections do not change the basic structural picture – except that healthcare cost increases are slowing – and are partly based on sequestration, a terrible policy that already looks too onerous to stick.’ According to our own long-term forecasts here at CBPP and to CBO’s recent estimates of the impact of the health cost slowdown on the budget, the structural picture has in fact changed significantly….

It’s essential to update one’s fiscal outlook to account for both recent and future improvements in that outlook. I see no reason to be impenetrable to that evidence…. Anyone who’s basing their fiscal analysis on such data needs to account for these facts.  Anyone who’s basing their hiring or investment plans on them is kinda crazy.